President Donald Trump’s newly minted trade pact with Canada and Mexico, dubbed the United States-Mexico-Canada Agreement, retains the current cross-border long-haul program for Mexico-domiciled carriers, likewise longstanding procedures for Canada-based fleets. The USMCA also is mostly seen as a boon for cross-border truck freight movement generally. USMCA replaces the 1994 North American Free Trade Agreement with a more modern deal that, in the short-term, wards off lingering trade uncertainty between the U.S. and its two largest trade partners and, long-term, helps bolster freight movement between the three countries.
Cross-border trucking program remains
USMCA retains the cross-border program that allows Mexico-domiciled carriers to obtain operating authority in the U.S., with a few minor revisions. The pact allows the U.S. DOT to cap the number of Mexican carriers who receive operating authority and to put a moratorium on granting authority to more Mexican carriers. But DOT would only be allowed to use those controls if it “determines that limitations are required to address material harm or the threat of material harm to U.S. suppliers, operators, or drivers,” according to the text of the deal.
The Office of the U.S. Trade Representative (USTR) says no such material harm or threat of harm exists currently. Mexican carriers that already have authority would be grandfathered in if any changes occur. Currently, 60 Mexican carriers have operating authority in the U.S. beyond the border commercial zone, ranging from one-truck owner-operators to a 394-truck fleet.
Likely long-term impact on freight volume
“It’s not going to add freight volume overnight, but in the long run it will not only add to freight volume in North America, it will help keep freight here,” says Bob Costello, chief economist at the American Trucking Associations.
In 2018, the most recent year for cross-border freight data, trucks moved $772 billion in goods between the U.S. and Canada and Mexico, according to the Bureau of Transportation Statistics.
“My concern prior to USMCA was, if we don’t have a modern trade agreement with our two largest trade partners, you could see some of that production leaving North America and going other places,” such as southeast Asia, Costello says. “If that were to happen, you would not get the truck freight movement across the border like we’re getting today.”
More immediately, the USMCA pact sidesteps “irrational tariff activity that could significantly disrupt freight movement at both borders,” says Kenny Vieth, president and senior analyst at ACT Research. The deal “makes tweaks to the existing paradigm,” rather than opting for a “whole new way of doing business.”
Additionally, the ongoing trade dispute between the U.S. and China has spurred greater investment in manufacturing in Mexico, says Jason Seidl, managing director of airfreight and surface transportation at investment firm Cowen Inc. The USMCA deal will spur even more investment in Mexico, says Seidl, likely creating more cross-border freight activity.
The pact awaits approval by the Canadian government but has been ratified by Mexico and the U.S.